Mortgage News>> Market Update October 2026
PERSONAL CONSUMPTION EXPENDITURE PRICE INDEX
PCE, the Fed’s preferred inflation gauge came in better than expected on Wednesday (09/30) with core at 3.0%. Well higher than the Fed’s target, but far better than expected. The report drastically reduces the likelihood of a Fed rate hike in October; although further rate hikes in 2026 are widely expected.
PRIVATE SECTOR JOBS
ADP report for Private Sector jobs came in hotter than expected on Wednesday (09/30), adding 90,000 jobs in September. Wall Street expected 68,000. The jobs market shows strong resilience. Great for the economy. Not so great for long term interest rates.
10 YEAR BOND YIELDS SOAR
Mortgage rates historically trend with the 10-year bond yields, which why it is closely watched by the housing and mortgage industry. On Wednesday (09/30), the 10-year soared to 5.304%; the highest level since June 2007. As did mortgage rates which are currently approximately 200 BPS+ higher than the 10-year.
Inflation, strong employment, strong economy, and rapidly rising U.S. debt will continue to put upward pressure on 10-year bonds, as well as mortgage interest rates. There are a multitude of variables that can change the current trajectory of rising rates, although all data today points to higher long-term rates for the foreseeable future. 8%, or even 9% mortgage rates are not out of the question.
As of today, bonds are pricing in four Fed rate hikes this year. Barring an unforeseen event, rates, long and short, are going higher; and likely much higher.
U.S. Debt
U.S. debt has been climbing rapidly for decades, under many administrations. Regardless of political party, as a Country we love to spend more than we earn. Keep kicking the can, and someone else can pay for it.
Under Trump’s first administration, spending surged. Largely due to the COVID pandemic. This lit the fuse for ballooning inflation. The Biden administration, even post COVID, kept on spending. To date, under Trump’s second administration, despite DOGE, and tariffs, even prior to the Iran war, spending has accelerated. In fiscal year 2025, the deficit rose $1.78 trillion. In fiscal year 2026 (ending 09/30/26), it is anticipated to rise an additional $2.0 trillion. The currently month deficit is more than $200 billion.
U.S. National Debt as of 09/30/2026 is $40,222,900,000 and rising rapidly. (Source: usdebtclock.org)
Why it matters. As the debt risings, and there is no plan to pay it down, let alone pay it off, the risk of default grows. Thus, the U.S. must pay higher returns to investors to entice them to purchase our debt. Debt we need purchased, so we can continue to spend. As the yields climb, so does our cost to service the debt; leading to even more debt. The U.S. currently spends over a $1 trillion dollars a year on debt interest.
If / when the war in Iran ends, which would have a profound positive impact on inflation, long term interest rates will still have upward pressure due to soaring U.S. debt. Even a recession, which is historically good for long term rates, may not be enough to break the rise in long term rates. It is likely that both should slow the rise, but it is unknown if it would do much long term to lower mortgage rates.
History has a way of throwing curve balls that can disrupt all predications. As of today, anticipate rising long term interest rates until the U.S. debt gets addressed in a meaningful way. Today that would cost approximately $360,000 per U.S. taxpayer.
REFINANCE BOOM
Yes, it is true or at least should be. Most homeowners are sitting on quite a bit of home equity; although equity is shrinking in many markets due to falling home prices. They are also sitting on record level consumer debt (credit card, auto loans, student loans, etc). There is a new saying in the industry, “a 3% mortgage isn’t saving you from foreclosure.” Millions of homeowners have exceptionally low mortgage rates but are buried in consumer debt at 20%+ interest rates.
What most do not realize is that there are financial tools, and debt consolidation options for many that can radically lower their monthly expense. Some options may require them to vacate their 3% mortgage, but if they can radically lower their total monthly expenses, they may find a way to breathe again and even save their home.
With rates rising, and not likely going lower soon, and with home values under pressure, time is not on every one’s side. There is no cost for a consultation. No cost to find out if you have viable options. Waiting is not a strategy. Foreclosures are on the rise, and 3% isn’t saving you.
CREDIT COMPETITION
FICO has been used for mortgage risk calculation since Fannie and Freddie implemented it’s use in 1995. FICO uses three credit bureaus, Experian, Transunion, and Equifax to create three separate credit scores. Most mortgage lenders use the middle of these scores for loan qualification, and loan pricing. Lower scores historically have insinuated higher risk. Higher risk leads to interest rate adjustments to price in increased risk called LLPAs (loan level price adjustments). Higher risk can also lead to stricter lending terms.
FICO is not perfect at evaluating risk, and there are many other variables involved, such as occupancy type, loan to value, debt to income ratios, and work history. The industry has been far better off using FICO to help evaluate risk (i.e. borrowers’ likelihood of repaying debt) for more than 30 years. Risk evaluation is the fountain for mortgage lending.
Unfortunately, FICO has had a monopoly on the mortgage industry. Thiry years ago, a tri-merge credit report cost the customer under $20. Today, they often exceed $200 or ever $300. Up until 2026, the industry had no other option. FICO had zero competition and had a monopoly on credit reporting.
Bill Pulte, the grandson of William Pulte who is the founder of PulteGroup (large residential home builder), was appoint by President Trump as the Director of the Federal Housing Finance Agency (FHFA) and chairman of Fannie Mae and Freddie Mac in 2025. The role of the Director of FHFA is to ensure that Fannie and Freddie operate safely and soundly while providing liquidity to the housing market. Since taking the office, Bill Pulte has been heavy criticized for doing little or nothing for a struggling housing market. He has floated the idea of a 50-year mortgage and the portable mortgage; both unlikely or impossible to implement.
Pulte did bring competition to FICO with VantageScore, effectively breaking the monopoly and stranglehold FICO had on the industry. In theory, competition should drive down the cost of credit reports. This is in theory only as that has not yet transpired.
In testing and implementation of VantageScore, VantageScore had a tendency of pulling higher credit scores than FICO, for the exact same borrower. Sometimes more than 100 points. Small changes to credit scores can radically change the pricing of the loan, interest rates obtained, an approval vs decline of loan, and/or loan terms. Same borrower, radically different risk. Realtors, loan originators, and borrowers will default to the credit provider that increases the likelihood of the strongest loan approval at the lowest costs. Same borrower. Radically different risk evaluation. Despite the actual risk hasn’t changed.
In the early 2000’s, with short term interest rates at near zero, banks and mortgage lenders ran out of qualified borrowers to lend money to so they changed the guidelines of who could qualify for a mortgage. Lower credit scores. Higher loan to values. No income or asset verification. No employment verification. They made it hard not to get approved for a mortgage, and business boomed; until it didn’t. Risk is risk. Manipulating credit scores or lowering lending standards does not chance the actual risk of the borrower. By 2008, that experiment led to a global financial meltdown. One of the biggest in history.
With all debt at historic highs, and default climbing at an alarming pace, the Director of the FHFA should be first and foremost ensure that Fannie and Freddie are operating “safely and soundly.” They are the stewards of the housing industry. Artificially inflating borrowers credit scores will create more buyers, and an unprecedented amount of risk; at a time where the system is already experiencing strain.
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Interest rates as of 10/01/2026. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $806,500. Loan to value not to exceed 80%. 740+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.
